Phuket Beach

1203 Words Mar 26th, 2010 5 Pages
{draw:g} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} {draw:frame} Table of Contents Declaration This report is submitted as partial fulfilment of the requirements for Module MBA 407 Financial Management at the European Business School London in spring 2010. We declare that this document embodies the results of the group’s work and that it has been composed by the group. Following normal academic conventions, we have made due acknowledgement of the work of others. We have worked together as a group and we have all contributed equally and would therefore be graded as a group. …………..…………………………… Fouad El Ghzal …………..…………………………… Nikola Pamler …………..…………………………… Ulrich …show more content…
But the NPV is not suitable to compare projects running fordifferent time periods. Instead I used the Equivalent Annual Cash Flow to compare both projects, regarding their time-period, as the Equivalent Annual Cash Flow measures the current economic gain for every year in a projects life period. As a result I got an Equivalent Annual Cash Flow of $124,103.76 for the PKC and an Equivalent Annual Cash Flow of $323,731.71 for the BKC. That is why I came to the point that the PKC project would be the better choice as it has the lower Equivalent Annual Cash Flow value which is an indicator for financial security. Even the Beach Karaoke Club (BKC) would have higher financial benefits this investment option is less attractive, due to an uncertain income which leads to a higher risk. If we take several unfavourable situations into account the PKC will still have a positive equivalent annual cash flow while our project’s equivalent that guarantees us annual cash flow will be negative. Even this fixed income from the rent goes only for a 4-years period it is still more attractive than an uncertain income over a 6-years period. I know that you liked the idea of recruit staff for the BKP from the current surplus of the hotel’s workforce, as the BKP project did not has to care about their salaries and does not have opportunity cost’s for recruiting and training. But we also have to consider that maybe one day the hotel requires all their workforce, which will be a problem

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